Sika : why Saint Gobain should withdraw from its foolish attempt.

The French glass and building material group had seven years ago a first negative experience resulting from its own potective double voting right statutory provision when Wendel pretended, with about 20% of the Saint Gobain shares , to rule the management… Nevertheless aiming for a tricky acquisition of the successful Swiss Sika, Saint Gobain keeps neglecting the opinions and rights of large communities of employees and shareholders.

Actually, as mentioned earlier on this site, like many Swiss companies, Sika lived under the “protection” of a kind of triple voting right provision which offers to the founder’s family Burckard no less than 52% of the AGM voting rights for an economic ownership of only 16% of the shares held in a private vehicle. Saint Gobain signed the promise to pay some € 2.75 billion, more than twice the stock price, fot this vehicle, subject to securing the benefit of the majority control by June 30th. of this year.

This resulted in a furious alliance of the majority of the current Sika Board with the so called minority Sika shareholders (including our parntner Ethos, the Bill and Melinda Gates Foundation, Fidelity and Threadneedle, plus the Sika management at large, all refusing to the French the benefit of the Burckard clause and obtaining until now some success with the Swiss courts…

Actually, the Saint Gobain attempt is and should remain, in Proxinvest opinion, not sustainable.

Proxinvest always actively opposed to double voting rights and any other protective devices. This Sika case is a perfect demonstration of the perverse impact of such provisions. Besides, Proxinvest engages for a serious reform of the control of related party transactions by the non-beneficiary shareholders: the lack nowadays of any serious protection of sharehodlers against the self-dealing of a controlling sharehodler should in itself qualify the Saint Gobain strategy as vulgar theft.

At its current purchase price the potential 16% stake in Sika would return a dividend of about 1% of its investment to Saint Gobain. In order to increase the needed cash generation Saint Gobain announced important “synergies” – a polite word for transfer pricing – and already dares to announce that most of these would be located in the current Saint Gobain group. Given the legitimate opposition of the Sika shareholders the implied strategy of the French is plain plundering.

Actually Pierre-André de Chalendar, the French CEO should try to persuade the spoled kids, the Burckard siblings, to share the control premium with all the other shareholders. Otherwise the lucky outcome of its Swiss franc forex protection taken by the French should be enough return for such an ill minded “strategic operation”.

PARIS March 29th.

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